*4.1.5 Royalty-based crowdfunding*

Royalty-based is a type of crowdfunding in which an initiative is financed, receiving part of the profits in return. Whoever launches the crowdfunding campaign offers quotas of future earnings of the project for which it requires funding. Royalty-based crowdfunding consists in the sale by the owner of the business and in the simultaneous purchase by the investor of a portion of the revenues that will be generated by future sales of the economic activity. Investors can therefore obtain a regular income guaranteed by sales and, at the same time, the owners of the business, remaining the only owners of the business, maintain full control over the performance of the business. However, royalties must be deducted from turnover and therefore they add costs to the business. For this reason, royalty-based crowdfunding is mainly recommended to all those activities that have high profit margins.

In Italy, the discipline, in general, is referable to the rules on the association in participation (articles 2549 ss. of the Civil Code), in which "those who finance participate in quote to the profits generated." In fact, the lender, in this particular crowdfunding model, receives the royalties based on the amount invested, which may concern, for example, copyright, intellectual property rights, patents, licenses, registered trademarks, etc.

Some authors believe that royalty-based crowdfunding is a sub-category of reward-based, already used in the music sector for the management of copyright on songs [19].

#### **4.2 New models**

In this section, new crowdfunding models are discussed. In particular, they are civic crowdfunding, corporate crowdfunding, do-it-yourself, energy crowdfunding, recurring crowdfunding, real estate crowdfunding and invoice trading.

#### *4.2.1 Civic crowdfunding*

The civic crowdfunding is a bottom-up financing method in which public works and projects are financed by the citizens themselves. This tool is able to favor the development of the territory and of the communities since both, individuals and social organizations, can give life to civic-based projects that benefit the entire community.

The civic crowdfunding increases the sense of belonging of citizens to their territory, favoring transparency through a more effective allocation of funds. In fact, citizens can follow and access all the information (both online and directly on the territory) relating to the projects they intend to support, starting from the first stages of development until their complete realization. Furthermore, with civic crowdfunding, public administrations and local authorities can create close relationships with citizens and SMEs test citizens' interest in each new project and invest their budget in those projects considered important by citizens themselves.

The civic crowdfunding can be of the type donation, reward or do-it-yourself, but it can be developed in the forms equity-based e-social lending, too.

In Italy, a bureaucracy that is too complex and sometimes difficult to overcome is a problem for this type of crowdfunding and this is making some civic crowdfunding projects impossible. There are also difficulties regarding payment systems: many of the potential donors are often in difficulty having to pay money through a

**225**

*Crowdfunding: The Case of Italy*

example—bank transfers.

interest, bottom-up participation.

*4.2.2 Corporate crowdfunding*

*4.2.3 Do-it-yourself*

*4.2.4 Energy crowdfunding*

reward.

communities.

*DOI: http://dx.doi.org/10.5772/intechopen.90940*

crowdfunding campaign and they seem to prefer traditional channels, such as—for

Recently, the civic crowdfunding has become an increasingly useful tool for the implementation of match-funding projects, in which cooperation between bottomup funding portals and public authorities is provided for the benefit of all local

In 2018, in Italy, the civic-based and match-funding projects have raised a total of around 4 million euros [20]. The initiatives were mainly promoted by the public administrations themselves, also through partnerships with local entities, which increasingly play an important role for the administrations in the operational implementation of the projects. The combination between public administrations and civic crowdfunding is certainly an interesting phenomenon, given the commonality between the elements at the base of crowdfunding and the values to which the public administrations are called to respond: community involvement, transparency of funding, ease of access and dissemination, system innovation, issues of collective

The corporate crowdfunding is a type of financing of the crowd, which, starting from the concept of Corporate Social Responsibility, can help companies design

In general, it can be of the type donation, do-it-yourself and reward. This is a typical Italian phenomenon. However, the mistake that the platforms often make is to orientate too much toward companies, while companies must be the result of

The do-it-yourself is a form of crowdfunding that allows to create a campaign within the site of the organization, without switching to another specific crowdfunding platform. In essence, the do-it-yourself crowdfunding refers to customized campaigns developed on independent sites in line with the identity of the project. Generally, the do-it-yourself can be civic, corporate, donation, pre-purchase and

Energy crowdfunding is a form of funding from below in the green and renewable energy sector. The purpose is the implementation of sustainable projects and energy transition, in order to reduce dependence on fossil-based fuels and contrib-

The interest toward this form of crowdfunding is demonstrated by the growth in Europe of energy cooperatives and participatory models for the development of investments in renewable energy. As in the context of energy cooperatives, crowdfunding platforms involve citizens and stakeholders allowing them to participate,

Over 90% of the active platforms are of financial type (crowdinvesting in equity and lending mode), that is, aimed at investing and raising capital. The rest of the platforms propose projects based on rewards in donation or reward mode.

The financial platforms propose projects defined, equity or community shares. By financing lending-based projects, investors lend their money in exchange for a future remuneration, which can sometimes be based on the sale of renewable

ute to the development of infrastructures and innovative technologies.

invest and benefit economically from investments in the energy sector.

products/services, directly involving customers in this phase.

work being done within the platform and not the opposite.

#### *Crowdfunding: The Case of Italy DOI: http://dx.doi.org/10.5772/intechopen.90940*

*Banking and Finance*

donation regulation contained in the Civil Code.

*4.1.5 Royalty-based crowdfunding*

registered trademarks, etc.

songs [19].

community.

**4.2 New models**

*4.2.1 Civic crowdfunding*

In Italy, the donation-based crowdfunding legislation generally refers to the

Royalty-based is a type of crowdfunding in which an initiative is financed, receiving part of the profits in return. Whoever launches the crowdfunding campaign offers quotas of future earnings of the project for which it requires funding. Royalty-based crowdfunding consists in the sale by the owner of the business and in the simultaneous purchase by the investor of a portion of the revenues that will be generated by future sales of the economic activity. Investors can therefore obtain a regular income guaranteed by sales and, at the same time, the owners of the business, remaining the only owners of the business, maintain full control over the performance of the business. However, royalties must be deducted from turnover and therefore they add costs to the business. For this reason, royalty-based crowdfunding is mainly recommended to all those activities that have high profit margins. In Italy, the discipline, in general, is referable to the rules on the association in participation (articles 2549 ss. of the Civil Code), in which "those who finance participate in quote to the profits generated." In fact, the lender, in this particular crowdfunding model, receives the royalties based on the amount invested, which may concern, for example, copyright, intellectual property rights, patents, licenses,

Some authors believe that royalty-based crowdfunding is a sub-category of reward-based, already used in the music sector for the management of copyright on

In this section, new crowdfunding models are discussed. In particular, they are civic crowdfunding, corporate crowdfunding, do-it-yourself, energy crowdfunding, recurring crowdfunding, real estate crowdfunding and invoice trading.

The civic crowdfunding is a bottom-up financing method in which public works and projects are financed by the citizens themselves. This tool is able to favor the development of the territory and of the communities since both, individuals and social organizations, can give life to civic-based projects that benefit the entire

The civic crowdfunding increases the sense of belonging of citizens to their territory, favoring transparency through a more effective allocation of funds. In fact, citizens can follow and access all the information (both online and directly on the territory) relating to the projects they intend to support, starting from the first stages of development until their complete realization. Furthermore, with civic crowdfunding, public administrations and local authorities can create close relationships with citizens and SMEs test citizens' interest in each new project and invest their budget in those projects considered important by citizens themselves. The civic crowdfunding can be of the type donation, reward or do-it-yourself,

In Italy, a bureaucracy that is too complex and sometimes difficult to overcome is a problem for this type of crowdfunding and this is making some civic crowdfunding projects impossible. There are also difficulties regarding payment systems: many of the potential donors are often in difficulty having to pay money through a

but it can be developed in the forms equity-based e-social lending, too.

**224**

crowdfunding campaign and they seem to prefer traditional channels, such as—for example—bank transfers.

Recently, the civic crowdfunding has become an increasingly useful tool for the implementation of match-funding projects, in which cooperation between bottomup funding portals and public authorities is provided for the benefit of all local communities.

In 2018, in Italy, the civic-based and match-funding projects have raised a total of around 4 million euros [20]. The initiatives were mainly promoted by the public administrations themselves, also through partnerships with local entities, which increasingly play an important role for the administrations in the operational implementation of the projects. The combination between public administrations and civic crowdfunding is certainly an interesting phenomenon, given the commonality between the elements at the base of crowdfunding and the values to which the public administrations are called to respond: community involvement, transparency of funding, ease of access and dissemination, system innovation, issues of collective interest, bottom-up participation.

### *4.2.2 Corporate crowdfunding*

The corporate crowdfunding is a type of financing of the crowd, which, starting from the concept of Corporate Social Responsibility, can help companies design products/services, directly involving customers in this phase.

In general, it can be of the type donation, do-it-yourself and reward. This is a typical Italian phenomenon. However, the mistake that the platforms often make is to orientate too much toward companies, while companies must be the result of work being done within the platform and not the opposite.

### *4.2.3 Do-it-yourself*

The do-it-yourself is a form of crowdfunding that allows to create a campaign within the site of the organization, without switching to another specific crowdfunding platform. In essence, the do-it-yourself crowdfunding refers to customized campaigns developed on independent sites in line with the identity of the project. Generally, the do-it-yourself can be civic, corporate, donation, pre-purchase and reward.

#### *4.2.4 Energy crowdfunding*

Energy crowdfunding is a form of funding from below in the green and renewable energy sector. The purpose is the implementation of sustainable projects and energy transition, in order to reduce dependence on fossil-based fuels and contribute to the development of infrastructures and innovative technologies.

The interest toward this form of crowdfunding is demonstrated by the growth in Europe of energy cooperatives and participatory models for the development of investments in renewable energy. As in the context of energy cooperatives, crowdfunding platforms involve citizens and stakeholders allowing them to participate, invest and benefit economically from investments in the energy sector.

Over 90% of the active platforms are of financial type (crowdinvesting in equity and lending mode), that is, aimed at investing and raising capital. The rest of the platforms propose projects based on rewards in donation or reward mode.

The financial platforms propose projects defined, equity or community shares. By financing lending-based projects, investors lend their money in exchange for a future remuneration, which can sometimes be based on the sale of renewable

#### *Banking and Finance*

energy produced through the project itself. The lending projects are differentiated according to the type of debt instrument offered (short- and long-term debt, mutual fund). In equity or community share projects, investors acquire shares in companies or cooperatives active in the production of clean energy, thus benefiting from dividends issued based on the economic performance of the underlying energy investment.

An Italian example of energy social lending is Edison Crowd, while an Italian equity-based company is Ecomill, which will soon be operational. There are examples of energy crowdfunding campaigns, too, such as some of those activated on WeAreStarting.
